Our Financial Perspective Quarterly Newsletter
The H Group, Inc. - Salem Financial Perspective is a quarterly newsletter that traces its roots to January 1992, when Ron (now retired) began writing Kelemen's Financial Perspectives. Unlike other newsletters, we write each and every article. We hope you find the information provided to be informative and useful. From time to time, other articles written specifically for our clients on a timely issue or for certain publications, may appear below. Please remember that all articles are copyrighted and can not be reproduced without permission.
December 2017 | Vol. 26, No. 3
1. Reflections on a 35-Year Career
Before Ron and Kathy sailed off into retirement, we interviewed Ron about his career. Learn more about his recollections of the good (and some bad) ol’ days.
2. Finding the Best Way to Give
Our charitably minded clients know the secret—that the very act of giving makes us happier people. But a little forethought and planning can make your gift go even further.
3. Happy Trails, Ron and Kathy!
We hope you were there, but if not, here’s a little recap of the wonderful party we threw to celebrate the legacy of Ron and Kathy Kelemen.
4. Team Update
As always, we give a little insight into what’s going on with our team personally and professionally.
Reflections on a 35-Year Career
Ron and Kathy Kelemen retired on November 2, after 35+ years in the financial advisory business. Before they got too far down the retirement path, we interviewed Ron about his years in this industry.
How did you get started in this business?
It was basically a serendipitous fluke. We had returned from nearly three years overseas in the Peace Corps and realized that there were so many new things in the US we knew nothing about, so we were curious about everything. I responded to an ad in the newspaper about an opportunity selling financial services. I had no interest in the job, especially if it involved sales; I simply wanted to know the definition of "financial services." After the manager explained what they were, I thought, "Gee, if I can sell latrines in Malay, selling a mutual fund in English should be a piece of cake." The rest was history.
What are the biggest changes you have seen over your 35-year career?
Where do I start? I haven’t had one career, but rather several strung together and overlapped by changes in business models, company affiliations, the tax code, new investment and insurance products, and the public’s knowledge about finances.
However, the two most important changes were the relentless pace of technological change and just how much the financial markets have grown at home and abroad. The Dow was at 800 when I started; now it’s now over 23,500, a 28-fold increase.
Anybody in this business knows how tough it really is, especially in the early years. Why did you succeed?
Several things, really. A lot of it was just being lucky and in the right place at the right time. I was blessed with ignorance, energy, and a hidden talent for marketing. I didn’t know how hard it would be and I knew little about the competition. I just cheerfully plugged away, and managed to stay just one step ahead of trends.
However, I think the most important thing I did was to build a team and use strategic partners to leverage myself and the practice.It started in 1983 when Kathy closed her tailoring shop to assist me. This freed me up to spend more time in the community, meeting with clients, writing, and conducting seminars. Mary Way joined me in 1995, and that’s when the practice really took off. It just kept getting better as the team grew.
The meltdown of 2008-09 was a huge event. What are your thoughts and memories about it?
It was downright scary. The hardest part for me was keeping a positive attitude with the clients, the public, I look back on that period as one of the worst and best times of my career. I was totally engaged in so many ways and no longer complacent. I got to see some people at their worst, but I got to see many of them at their best as they did what they could to cope.my own team.
This will come as a shock to some people, but I didn’t like working with numbers, computers, and minutiae. I’m a BIG picture person, so I surrounded myself with people who are better at details and love those things. What I loved to do was get new clients in the door and help them solve their problems. I also loved public speaking, writing, and creating better ways for us to do things. The business paid the bills (most of the time) and it gave Kathy and me a platform to get involved with local and international community projects, getting to know many interesting people and learn many things beyond my own profession.
Looking back, what are some of the highlights of your career?
The team and the processes we put in place will always be right at the top of the list, as do surviving and thriving in this industry during three and a half decades of rapid change. Beyond that, I’d say the success of my book, The Confident Retirement Journey, having our firm honored by the Chamber of Commerce as the 2011 Small Business of the Year, and Kathy and I receiving the Distinguished Service Award at the 2012 First Citizen’s banquet.
But those are the public things. Behind the scenes we helped so many people day in and day out, and I didn’t often realize it at the time. Ever since I announced our retirement, clients and allied professionals have been going out of their way to explain just how my team and I helped them in ways that I had never known. So, of late, I’ve been discovering a lot of "new" highlights.
If you had to do it all over again, what would you do differently?
Not much. So much of it was luck being in the right place at the right time with the right people and the right attitude (and a lot of ignorance and hard work). However, there are some investment recommendations I wish I had made and had not made. Also, I wouldn’t have tried to be all things to all people.
What will you miss?
Our clients, some of whom are so fun and delightful, that I just couldn’t believe I got paid to work with them. I hope I can remain in touch with them. I’ll certainly miss the team and former colleagues and the excitement and belly laughs we have every day. However, with the office just three blocks from our condo, I’ll stop by often. They’re good friends and like family to Kathy and me.
What are you and Kathy going to do in retirement?
Where do we start? Our motto has been: "Always make your future greater than your past." We intend to keep living up to it in this next life adventure. We are committed to keeping Salem as our home base. We have big travel plans on the calendar and we’re going to continue our community involvement. We’re looking forward to mid-week activities, longer workouts, and more time with friends. Above all, we’re looking forward to a slower pace with spontaneity in our travels and daily routines.
Editor’s note: If you want to follow Ron & Kathy’s travels, check out the "Ron & Kathy’s Mid-Life Adventures Blog" at www.rwk777.blogspot.com.
Finding the Best Way to Give
Our work with clients this time of year is often focused on tax planning and finishing up donations for the year. For families with a charitable heart and a variety of assets, cash may not be the most tax efficient way to support their charity of choice.
Qualified Charitable Distributions (QCD)
How They Work
Individuals over 70.5 years young can donate up to $100,000/year directly from their IRA to their favorite 501(c)(3) organization while at the same time fulfilling their required distribution for the year. Giving directly from your IRA means that the required distribution isincluded in your taxable income. This strategy can of course keep you from moving to a higher marginal tax rate, but it can also help avoid some of the more subtle tax implications associated with an increased AGI. The taxability of your Social Security benefits, the means test that is applied to your Medicare Part B premiums, the 3.8% surtax on investment income and limitations on otherwise available deductions are all based on your taxable income.
QCD’s work wonderfully if you have a charitable heart, are over 70.5 and do not need some/all of your required distribution for cash flow. They also work well for clients who are unable to fully take advantage of their charitable deduction (either because some/all falls below the standard deduction or because the contribution is so large is phases out at the 30%-50% of AGI limits and must be carried forward).
How It Works
After tax brokerage accounts—particularly during market highs—can have a large amount of embedded gain. Gifting your most highly appreciated stock or mutual funds has several benefits. The tax liability associated with the position disappears—you permanently avoid the tax liability while at the same time, may be able to write off the full market value of the donation. Frequently, growth positions not only distort the tax consequences of a diversified portfolio, but also its allocation, making it more risky than intended. Gifting a portion of an overgrown asset can help reduce volatility and rebalance your portfolio.
Donating appreciated stock is great for those with individual stocks or mutual funds that are highly-concentrated and have a low cost basis. Just make sure you’ve held the position for over 12 months in order to get a deduction based on the full market value. Like most great ideas, it’s best to pencil out a donation of appreciated stock well in advance of December 31st, as it can often take several weeks to complete the transfer.
Donor Advised Funds (DAF)
How They Work
Donor Advised Funds serve as a conduit for nonprofits. They allow donors to gift now, and choose their 501(c)(3) later. Contributions to a DAF are irrevocable, which is why the IRS views them essentially as a charity and allows an immediate deduction. They can serve as a place to send your cash or appreciated stock donations, but they cannot be funded with a QCD.
DAF’s work well if you have a year of particularly high income, but don’t want to rush the decision of which nonprofits to give to. Because DAF’s have a team of experienced administrators, they are often very useful for clients with non-publicly traded assets (e.g. restricted stock, private company stock, etc.). In those situations, they have the bonus benefit of making life a little easier for your executor, who is relieved of the burden in finding a buyer for non-public assets. In addition to these perks, we’ve also seen DAF’s serve powerful roles in family giving.
What's Right for You
When reviewing the options, our clients are typically asking us to compare one of the above strategies (which take time and preplanning) with writing a check (which can be done spontaneously and simply). We find that careful planning, discussion and consultation with their CPA helps to guide us in the right direction. Our role as financial advisors is to have a broad view of our client’s big picture and collaborate with allied professionals to assure everything works in thoughtful harmony
Happy Trails, Ron and Kathy!
In the opening article, you got a glimpse at the many ways Ron and Kathy Kelemen have shaped our firm into the success that it is today. We couldn’t let them head off into retirement without a proper celebration. On November 3rd, around 200 people gathered to celebrate the couple at The Grand Hotel here in downtown Salem. The three hour soiree was full of music, laughter and even a surprise video honoring the two of them. (If you haven’t seen the video yet, you can find a link to it on our blog.) A big thank you to all who were able to attend and make it such a wonderful night.
We are grateful for the legacy that Ron and Kathy created: integrity, respect and a passion for serving our client families. These values continue to drive our practice. We look forward to hearing from the Kelemen’s and seeing them often. They are family. Happy Trails, you two!
Michelle had a very good fall. She had a lot of fun helping square away every detail of Ron and Kathy’s retirement party in November. Outside of work, she’s been busy volunteering with the Rotary Club of Salem in procuring auction items for their February fundraiser. She has completed formal training through NAMI (National Alliance on Mental Illness) and is now a group and class facilitator to support families going through mental illness-related crisis. Around the time you’re reading this, she’ll be enjoying her annual volunteer efforts with "Magic at the Mill" at the Willamette Heritage Center.
In mid-September, Katherine and her family vacationed for a week in Playa del Carmen, Mexico. In between climbing Mayan ruins and snorkeling the reef, they had some sweet family moments lounging around the pools and walking the beach. This was a particularly precious family time because, a week after their return from Mexico, Katherine underwent a medical procedure. This procedure had been in the works for several months and was very successful. Katherine is glad to be back in the office full time and she is thankful to the H Group Team for being so supportive while she healed.
Brenna limped into fall after running Hood to Coast with her team, as she does most years. She attended an annual gathering of experts in the financial life planning field at a conference in South Dakota, and enjoyed a couple continuing education luncheons. She was honored to be one of two guest speakers at the premier "Women’s Worth" seminar, a women’s-only gathering on estate and financial planning. Unbelievably, her daughter Mika is 9 months old already. They flew down to San Diego recently so Mika could meet her great grandma Gigi.
In November, Larry decided to skip the annual Estate Planning Council of Seattle / University of Washington estate planning seminar and instead elected to visit clients in Palm Desert. Yes, weather did play a role in the decision making. Laurie wrapped up a successful golf season with wins in two tournaments and is now focused on taking over the bookkeeping for the business. They had help from son, Eric, and his girlfriend, Ivy, putting up the Christmas lights this year and are looking forward to seeing daughter, Jenna, when she flies home from Atlanta for Christmas.
The opinions expressed in this newsletter are those of Ron Kelemen, Larry Hanslits, CFP®, Brenna Baucum, CFP®, and Katherine Suchan, CFP®, CLU. They do not necessarily reflect those of The H Group, Inc. They are general comments that may not be appropriate for every individual. They should not be construed as legal or tax advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic information is historical and not indicative of future results.